Hospitality Jobless Rate Continues to Fall in US

Sarah Brodsky

Jan 4, 2017

The latest employment statistics hold some good news for job seekers in hospitality. In November, the U.S. seasonally adjusted unemployment rate fell to 4.6 percent; it had been 4.9 percent in October. The last time the unemployment rate was this low was August 2007, before the financial crisis and ensuing recession led to the loss of 8.7 million jobs. The Bureau of Labor Statistics gave a preliminary report of 15,600,000 people employed in leisure and hospitality in November, up from 15,307,000 a year earlier, showing that this sector has added jobs.

A low unemployment rate is good for a couple of reasons. First, it means that most people who are looking for jobs are able to find positions. If there were a lot more job applicants than openings, the unemployment rate would be higher, and it would indicate that people were having trouble finding work. Second, a low unemployment rate can signal upcoming wage increases.

When unemployment is high, employers can easily fill open positions. But when unemployment is low, employers have to compete with other businesses to hire qualified workers. Employers should then bid up wages to attract new hires. Economic studies show that this usually happens. For example, economists at the Federal Reserve Bank of St. Louis found that from 2008 to 2013, states with low unemployment rates generally had better wage growth than states with high unemployment rates.

A low national unemployment rate doesn’t necessarily imply that conditions are good for workers everywhere, since some regions are doing better than others and some industries are more in demand. To give a snapshot of economic activity in different parts of the country and for different industries, the Federal Reserve publishes a report called the "Beige Book." In the November 30 edition of the Beige Book, the Federal Reserve reported that in most of its Districts, staffing services said that they were increasing pay or that they were having trouble finding workers at current pay levels, which suggests that wage increases could be on the horizon. Looking specifically at tourism, the Beige Book reported that Boston, Minneapolis, and San Francisco saw “strong growth” in the tourism economy compared to a year earlier and that Philadelphia and Kansas City had “modest growth.”

Low unemployment appears to be driving up wages in hospitality. In a report for PKF Hospitality Research, Robert Mandelbaum notes that hotels’ labor costs grew by 4.5 percent after adjusting for inflation in 2015 and that from 2013 through 2015, 89 percent of the increase in hotels’ labor costs was due to paying higher wages. And the Bureau of Labor Statistics reports provisional average hourly earnings for employees in leisure and hospitality as $15.06 in November. That’s up from $14.11 in November of 2014 and $14.47 in November of 2015.

The Bureau of Labor Statistics’ predictions show job growth in hospitality continuing in the future. In a forecast published in December 2015, it predicts that the number of people employed in the sector will go up to 15,651,200 by 2024.